Zung Fu Co Ltd v. The Collector of Stamp Revenue
Read the full judgment text of HCSA 1/1973 on BabelCite. This High Court CFI judgment.
1. This is an appeal against an order of a District Judge dismissing an appeal against the assessment by the Collector of Stamp Revenue of the stamp duty payable upon an Assignment dated 21st May 1971. The consideration stated in the Assignment was a sum of $3,700,000 and when the instrument was first presented for stamping it was accepted that that was a proper figure and the instrument was stamped under head 19(2) of the Stamo Ordinance. Upon inquiry the Collector of Stamp Revenue came to the
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HCSA000001/1973 IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) STAMP APPEAL NO. 1 OF 1973 (On appeal from V.D.C. Stamp Appeal 2/73) -----------------
----------------- Coram: Briggs, C.J., Huggins & McMullin, JJ. Date of Judgment: 25th October 1973. ----------------- JUDGMENT ----------------- Huggins, J.: 1. This is an appeal against an order of a District Judge dismissing an appeal against the assessment by the Collector of Stamp Revenue of the stamp duty payable upon an Assignment dated 21st May 1971. The consideration stated in the Assignment was a sum of $3,700,000 and when the instrument was first presented for stamping it was accepted that that was a proper figure and the instrument was stamped under head 19(2) of the Stamo Ordinance. Upon inquiry the Collector of Stamp Revenue came to the conclusion that this was an under-valuation and he obtained a valuation of $4,400,000. Being, therefore, of opinion that the consideration stated in the instrument was inadequate, by virtue of s.27(4) the Collector proceeded to re-assess the duty under head 53(2) as being a voluntary disposition inter vivos of land. The result of this re-assessment was that a further $14,000 became payable and the purchaser was called upon to pay, and did pay, this additional duty. 2. It is common ground that the valuation upon which the Collector relied was made not on 21st May 1971 but on 30th April 1970, that being the date of an Agreement for the sale and purchase of the land. The case for the Appellant is that an earlier date should have been taken for the purposes of this valuation. The circumstances are these. The appellant company (to whom I shall refer as "Zung Fu"), having contracted to purchase a piece of land in Quarry Bay, had in mind to develop it. On 18th June 1969 Zung Fu entered into an agreement with Hsin Chong & Co., Ltd. (to whom I shall refer as "Hsin Chong") the substance of which was that Hsin Chong would erect a 15-storey building, of which Zung Fu would eventually use the bottom three floors for their business as garage proprietors. The agreement provided that Zung Fu and Hsin Chong would incorporate a company to be named Hsin Fu Ltd. (to which I shall refer as "Hsin Fu") and that Zung Fu should then sell the land to Hsin Fu. At the same time Zung Fu were to enter into an agreement with Hsin Fu for the purchase of the three bottom storeys of the proposed new building at a price of $3,700,000. The proposed agreement for the sale of the three bottom storeys was in fact duly concluded on 30th April 1970 and the Assignment now in question was a conveyance of the three bottom storeys by Hsin Fu to Zung Fu. 3. The contention of the Appellants is that the valuation of the property for the purposes of s.27 of the Ordinance should not have been made on 30th April 1970, the date of the second agreement, but on 18th June 1969, the date of the original agreement between Zung Fu and Hsin Chong. The main foundation for the argument appears to be the wording of head 19(2), which reads:
Counsel has submitted that the word "instrument" at the end of that head cannot mean the Conveyance on Sale itself but must mean the Agreement for sale leading up to the Assignment. Counsel then says that the agreement for sale is to be found not only in the Agreement dated 30th April 1970 but also in the Agreement dated 18th June 1969 and he seeks to have a valuation as at that earlier date. With respect, I think there are two major flaws in this argument. In the first place I cannot accept that the word "instrument" in head 19(2) means anything other than the Conveyance on Sale itself. On the plain reading of the statute it seems to me clear beyond any peradventure of a doubt that the word "instrument" there refers to the particular instrument which is to be stamped. It follows, as the learned judge pointed out, that strictly the valuation should have been made as at 21st May 1971, but no one has asked that a valuation be made as at that date and it must be assumed that both sides were prepared to accept that no variation in value had occurred between those two dates, an assumption which I have no doubt was in favour of the Appellants. Counsel for the Crown has asserted from the Bar, although there was no evidence before the judge to this effect, that it is the invariable practice both here and in England, where an agreement for sale and purchase has preceded a conveyance on sale, that any valuation for the purpose of assessing stamp duty on the Conveyance on Sale shall be made as at the date of the agreement for sale and purchase. That may well be so, although I would not readily assume that this is the case where the value has dropped between the date of the agreement and the date of the Assignment. Why there should be this practice we have not been told but, assuming that it does exist, one may surmise that it rests upon a desire to ensure that a tax-payer shall not suffer by reason of the law's delays. Whatever may be the practice, in strict law it seems to me clear that it is the date of the Conveyance on Sale which is the material date for the valuation and that any variation from that date can only be as an act of grace. If that be correct then the short answer to this appeal is that the Collector of Stamp Revenue cannot be compelled to give more grace than he sees fit. 4. Even if the Appellants had been right in their contention that "the instrument" in head 19(2) was the Agreement for Sale, it seems to me that they were not entitled to a valuation at a date prior to 30th April 1970. Counsel says that the two Agreements in the present case must be "read together". Counsel cited Studds v. Watson (1884) 28 Ch. D. 305, a case concerned with the requirement of the Statute of Frauds that an agreement relating to an interest in land should be evidenced by writing. In my view that case is no authority for the proposition that the agreement of 18th June 1969 formed part of an agreement for the sale and purchase of the land which was implemented by the Assignment of 1971. It is true that the second agreement and the Assignment were contemplated by the original agreement and, of course, I accept what was said by Lord Denning in Oughtred v. Inland Revenue Commissioners 1960 A.C. 206, 233 that
The question in that case was not the question which we have to answer but whether the transfer was a "conveyance or transfer on sale, of any property". In our case the Agreement of 30th April 1970 was by itself a full and sufficient agreement for sale and purchase, while the previous agreement was nothing more than an agreement by one of the parties to the 1970 agreement (Zung Fu) and a third party (Hsin Chong) whereby Zung Fu agreed inter alia that it would enter into an agreement with Hsin Fu. 5. The learned judge said that the real issue in the appeal was whether for the purposes of the Stamp Ordinance the 1971 Assignment should, or might properly, be related back through the 1970 Agreement to the 1969 Agreement "on the ground that" the 1969 Agreement constituted an "instrument" within the s.3 definition of a Conveyance on Sale. He went on to find "that the agreement of 16.6.69 was not an instrument falling within the definition of 'Conveyance on Sale' in s.3 of Cap. 117 and accordingly that the Collector of Stamp Revenue was justified in expressing the opinion which brought the provisions of s.27 of Cap. 117 into operation in respect of the Assignment of 21.5.71" (the emphasis is mine). I have no doubt that the Agreement of 1969 was an "instrument", for that word is defined in s.3, and I agree that it did not constitute an "'instrument' within the section 3 definition of a conveyance on sale". However, that of itself would be no ground for saying that the 1971 Assignment might properly be related back through the 1970 Agreement to the 1969 Agreement. What I think the learned judge meant was that if the 1969 Agreement were a Conveyance on Sale a valuation for the purposes of s.27 could properly be made at the date of it because in those circumstances the Agreement might in some way be identified with the Conveyance on Sale dated 1971. I do not think it could, but that does not vitiate the decision of the learned judge. Again, the learned judge was clearly right to say that the Agreement of 16th June 1969 was not within the definition of "Conveyance on Sale" in s.3 despite the fact that a Contract or Agreement for the sale of an equitable interest in property is to be charged as if it were an actual Conveyance on Sale: it was not a Contract or Agreement for the sale of an equitable interest in property. That, however, did not justify "the Collector of Stamp Revenue in expressing the opinion which brought the provisions of s.27 into operation in respect of the Assignment". In spite of these misdirections I respectfully agree with the decision reached by the learned judge. The real issue was whether the 1969 Agreement was in any sense an Agreement for Sale and Purchase and in my view it was not. 6. Counsel for the Appellants relied upon a passage in the judgment of Lord Wilberforce in Ebrahimi v. Westbourne Galleries Ltd. 1972 2 W.L.R. 1289, 1297 where he said
That was a case where it was sought to wind up a company on the ground that so to do would be just and equitable. It was in that context that the learned judge said what he did and in my view the present case is entirely distinguishable: it does not support the contention of the Appellants. Reliance was also placed on Snelling v. John G. Snelling Ltd. 1973 1 Q.B. 87 where a member of a family company sued the company for moneys which, under an agreement with the other members to which the company itself was not a party, he had agreed would be forfeited in the circumstances which had occurred. It was held that the company, being a stranger to the contract, was not entitled to rely on the terms of the contract in defence to the claim, but that there were grounds upon which the court could exercise its discretion to stay the proceedings as an abuse of the process. However, since the other members of the family had been joined as parties and judgment had been given in their favour against the plaintiff the judge thought that the reality of the situation required the dismissal rather than the staying of the plaintiff's claim. By analogy counsel for the Appellants says in the present case that although Hsin Fu could not enforce the Agreement of 1969 which provided for a price of $3,700,000, yet the reality of the matter was that Hsin Fu could not, by reason of that earlier agreement, contract at any other figure. That may be so, but the fact remains that the agreement for sale and purchase which was implemented by the Assignment of 1971 was the Agreement of 30th April 1970 and, according to the accepted practice, that was the relevant date for any valuation under s.27. 7. I would dismiss the appeal. 25th October 1973. Representation: |